At the height of the Covid-19 sell-offs in March, bonds were the capital markets’ safe haven of choice as investors piled into bonds by the droves. As more economies look to rebound from the pandemic, it might seem that investors are more apt to turn up the risk dial and dive back into equities, but global investment firm Goldman Sachs is forecasting that bonds will continue to outperform stocks.

Per a CNBC article, “Global equities have ‘rarely been as attractive relative to bonds,’ according to new research from Goldman Sachs, and investors should rotate into stocks since they’ll ‘likely outperform bonds’ over the next twelve months. The firm’s analysis is based on the equity risk premium, which is currently close to an all-time high.”

The forecast comes as major indexes like the S&P 500 continue to gain, but could stocks be overpriced?

“The call comes despite growing concerns that current valuations are stretched,” the article added. “Global stocks have retraced 99% of their coronavirus losses, and Goldman noted that equities are the most expensive they’ve been since the tech bubble based on the price-to-earnings ratio over the next 24 months.”

Whether you agree with Goldman Sachs’ forecast or not, bonds are still an essential part of a portfolio. ETF investors looking for core bond exposure can look to the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG), which has been the go-to fund for investors.

Fund facts:

  • AGG seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index.
  • The index measures the performance of the total U.S. investment-grade bond market.
  • The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.

AGG Chart

AGG data by YCharts

Another ETF to consider is the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.

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